April 29, 2009 / 1:17 PM / 9 years ago

CORRECTED - UPDATE 2-Maple Leaf posts profit, scandal still hits margins

(Corrects loss figure in paragraph 8 to C$10,000 from C$10 million)

* Adj EPS C$0.05 vs consensus C$0.03

* Revenue rose 6.7 pct to C$1.28 billion

* Shares up 0.4 pct at C$8.48 (Recasts. Adds analyst’s comments and stock price)

By Scott Anderson

TORONTO, April 29 (Reuters) - Maple Leaf Foods (MFI.TO), one of Canada’s largest food processors, reported a quarterly profit on Wednesday but the effects of last summer’s costly recall of tainted meat lingered on.

Even though revenue and profit rose in its latest quarter, the company said its profit margins continued to be hurt by the meat scandal, which resulted in 22 deaths.

The Toronto-based company said it planned to implement measures to improve margins, including cutting internal costs and reducing promotions.

“I’m very disappointed, the margins have not improved,” said Robert Gibson, an analyst at Octagon Capital. “It looks like they are spending too much on advertising to build the brands.”

Maple Leaf shares, which dropped to a year low of C$6.54 in October, were up 0.4 pct at C$8.48 on the Toronto Stock Exchange on Wednesday morning.

Last summer, contaminated deli meats from a Maple Leaf food processing plant in Toronto were linked to at least 22 deaths. After an extensive investigation, the company said it believed two slicers at the plant had been harboring listeria bacteria.

Earlier this year it reached a tentative C$25 million ($20.8 million) settlement in a series of class-action lawsuits related to the listeriosis outbreak.

Maple Leaf said it earned C$2.9 million, or 2 Canadian cents a share, for the first quarter, ended March 31, compared with a loss of C$10,000, or nil per share, for the same period a year earlier.

Adjusted for the impact of restructuring and other items, the company earned C$31.6 million, or 5 Canadian cents a share, for the quarter ended March 31. That compared with C$33.1 million, or 4 Canadian cents a share, for the same period last year.

Revenue rose 6.7 percent to C$1.28 billion.

Analysts, on average, were expecting earnings per share of 3 Canadian cents before items and revenue of C$1.22 billion, according to Reuters Estimates.

The company’s meat division earned C$11.4 million, less than half of the C$25 million it earned for the same quarter a year earlier, while its bakery group earned C$19.5 million, up from C$17.2 million for the same period a year earlier.

“Results in the first quarter were overshadowed by depressed margins in our packaged meat operations, as we continue to recover from the major product recall last year,” Michael McCain, president and chief executive, said in a release.

“While volumes improved, which was our first priority, margins will take longer to restore.”

Canada Bread CBY.TO, which is 89.8 percent owned by Maple Leaf, said in a separate release that it earned 60 Canadian cents during the quarter, up from 52 Canadian cents a year earlier.

$1=$1.20 Canadian Reporting by Scott Anderson; editing by Peter Galloway

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